Friday, July 16, 2010

Manufacturing cools in June

WASHINGTON — New evidence of a slowing economic rebound emerged Thursday in reports that manufacturing activity is slowing after helping drive the early stages of the recovery.
Factory output fell in June, according to a government report on industrial production. It was the sharpest monthly drop in a year, and two regional manufacturing indexes sank this month.

Production of automobiles, home-building materials and processed food all fell in June. The data sent stocks falling.

Federal Reserve officials took note of the weakening recovery when they met last month and lowered their forecast for economic growth, according to minutes released Wednesday.

Manufacturing helped boost the economy last year when the recession ended and has since been one of the strongest sectors in the recovery. June's decline in output was the first in four months. Overall industrial production ticked up for the month, but that was mainly the result of hot weather that increased demand for electricity from utilities.

"Today's report supports the view that the manufacturing recovery lost some momentum," said Peter Newland of Barclays Capital Research.

The decline in factory output came as new data offered a mixed picture of the recovery. Applications for unemployment benefits fell to 429,000, the lowest level since August 2008, according to the Labor Department. Much of that was the result of seasonal factors. General Motors and other manufacturers skipped their usual summer shutdowns.

Separately, the Labor Department said that wholesale prices fell for a third straight month. Prices were pulled down by a drop in energy costs and the biggest plunge in food costs in eight years. Excluding those two volatile commodities, inflation was nearly flat.

The Federal Reserve report on industrial production showed that overall output at the nation's factories, mines and utilities rose 0.1 percent in June. It was the fourth straight monthly gain. But factory output, the largest component of industrial production, dropped 0.4 percent.

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